Correlation Between Prudential Government and Hartford Global

Can any of the company-specific risk be diversified away by investing in both Prudential Government and Hartford Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential Government and Hartford Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Prudential Government Income and Hartford Global Impact, you can compare the effects of market volatilities on Prudential Government and Hartford Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential Government with a short position of Hartford Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Government and Hartford Global.

Diversification Opportunities for Prudential Government and Hartford Global

0.56

Correlation Coefficient

Prudential Government  Hartford Global

Very weak diversification

The 3 months correlation between Prudential and Hartford is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Government Income and Hartford Global Impact in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Global Impact and Prudential Government is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential Government Income are associated (or correlated) with Hartford Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Global Impact has no effect on the direction of Prudential Government i.e., Prudential Government and Hartford Global go up and down completely randomly.

Pair Corralation between Prudential Government and Hartford Global

Assuming the 90 days horizon Prudential Government Income is expected to under-perform the Hartford Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Prudential Government Income is 2.11 times less risky than Hartford Global. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Hartford Global Impact is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,607  in Hartford Global Impact on September 22, 2024 and sell it today you would lose (57.00) from holding Hartford Global Impact or give up 3.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Prudential Government Income  vs.  Hartford Global Impact

Prudential Government

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prudential Government Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Prudential Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Global Impact

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Global Impact has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hartford Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Government and Hartford Global

The main advantage of trading using opposite Prudential Government and Hartford Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Government position performs unexpectedly, Hartford Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hartford Global will offset losses from the drop in Hartford Global's long position.

The idea behind Prudential Government Income and Hartford Global Impact pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Global Correlations module to find global opportunities by holding instruments from different markets.